IMF Survey: IMF to Discuss New Loan Program With Egypt, Says Lagarde

IMF News, August 22, 2012

Source details

Canonical URL: IMF Survey: IMF to Discuss New Loan Program With Egypt, Says Lagarde

The IMF is ready to help Egypt and will send a technical team to Cairo in September to refine details of possible financial assistance.
“A technical team will be arriving in Cairo in early September to work with the authorities on their program and discuss possible forms of financial support from the IMF.”
Egypt has formally requested a loan of $4.8 billion.

Egypt faces "considerable challenges", including the need to restart growth and reduce budget and balance of payments deficits.
Emphasized priorities:
- Creating jobs.
- Supporting small and medium-sized enterprises.
- Getting the country’s economy back on track and raising the living standards for all.
Quote on public expectations: “The Egyptian people have legitimate expectations for a better life and greater social justice. We at the IMF stand ready to help.”

Preference for external borrowing: “We prefer foreign borrowing at this stage given the low interest rate of the IMF loan compared to much higher rates when borrowing domestically,” said Prime Minister Hesham Kandil.
Rationale provided: Domestic borrowing would "crowd out the private sector and the IMF loan would help us avoid that."

Managing Director Christine Lagarde met with President Mohamad Morsi, Prime Minister Hesham Kandil, Finance Minister Mumtaz El-Saieed, and other senior Egyptian officials on August 22, 2012.
Lagarde: “The IMF will accompany Egypt as it undertakes this challenging journey. It's an Egyptian journey and the IMF is a partner in that journey."
Lagarde expressed being "pleased to meet with Egypt’s new economic team" and said, “We are impressed by the strategy that President Morsi and Prime Minister Kandil have proposed during our meetings today.”

The possible financial support to Egypt would be part of the IMF’s commitment to help Arab countries in transition.
With the recent approval of two programs, one for Jordan and the other for Morocco, the IMF has committed to support the region with over $8 billion.
The IMF also provided financial support for Yemen earlier this year.
Lagarde’s visit to Egypt is the second to an Arab country going through transition, after her visit to Tunisia earlier this year.

Egypt had three IMF-backed programs between 1991 and 1998 (two Stand-By Arrangements and an Extended Fund Facility; the last two programs were precautionary).

Source: IMF Survey: IMF to Discuss New Loan Program With Egypt, Says Lagarde (August 22, 2012).